Ways to Avoid Lenders Mortgage Insurance (LMI) When Buying a House with Less Than 20% Deposit

Lenders Mortgage Insurance (LMI) is a requirement for borrowers who have less than a 20% deposit on their home loan. While LMI can be a significant cost, there are ways to avoid LMI. Here are strategies to help first-time homebuyers avoid paying Lenders Mortgage Insurance (LMI):

Ways to Avoid Lenders Mortgage Insurance (LMI) When Buying a House with Less Than 20% Deposit

1. Opt for Government Schemes to avoid LMI

   Several national and state-specific government schemes can assist first-time homebuyers to avoid LMI. These include the Australian Government 5% Deposit Scheme (General Stream and Family Stream) and Help to Buy, or state-specific programs may help buyers avoid LMI.

2. Profession-Based LMI Waivers

   Some professions, such as doctors, lawyers, and accountants, may be eligible for LMI waivers due to their perceived lower risk to lenders. For a full list of professions that qualify for these waivers, it’s best to check with your lender or a mortgage broker to ensure eligibility. This could potentially save you significant costs when purchasing a home with a deposit of less than 20%.

3. Seek First Home Owner Grant (FHOG)

   First-time homebuyers may be eligible for the First Home Owner Grant or other regional grants, which can help increase their deposit and reduce the need for LMI.

4. Guarantor Loan

   Consider using a guarantor loan, where a family member acts as a guarantor using their property as security for your loan. This can help you avoid LMI by allowing you to borrow more than 80% of the property's value.

5. Low Deposit Home Loan

   Some lenders offer low-deposit home loans with features designed to reduce or eliminate LMI. For example, Keystart Home Loans in WA provides low-deposit loans with no LMI for eligible buyers.

6. Family or Friends Co-Ownership

   Another way to avoid LMI is by buying a home with a family member or friend who can contribute to the deposit. This co-ownership arrangement allows both parties to combine their resources and qualify for a loan without paying LMI.

These strategies can help reduce the cost of buying a home with a deposit of less than 20%. Always consult with a mortgage broker to explore the best options for your financial situation.

Full details can be found in the First Home Buyer Guide here: First Home Buyer Guide.

Disclaimer:

The information provided on this website is for general information and educational purposes only. It does not take into account your personal objectives, financial situation, or needs, and should not be relied upon as financial, legal, or tax advice. While we strive to ensure the content is accurate and up to date, we make no guarantees of its completeness, reliability, or suitability. Any reliance you place on the information is strictly at your own risk. We recommend that you seek independent professional advice before making any financial decisions, including from a licensed mortgage broker, financial adviser, or tax professional. References to government schemes, grants, or lender products are subject to change and eligibility criteria. Please confirm details with the relevant authority or provider. We are not responsible for any loss, liability, or damage incurred as a result of the use of this website or its content.